I believe that ASX growth shares are the best way to invest in 2020.
There is a lot of uncertainty at the moment due to COVID-19, so I think it makes sense to go for businesses that can deliver good growth in the short-term and the long-term.
They need to be businesses that could be resilient even in the face of COVID-19 impacts:
Share 1: Pushpay Holdings Ltd (ASX: PPH)
Pushpay is one of the best ASX growth shares in my opinion. It facilitates digital giving to not for profits. At this stage its biggest client base and its largest opportunity is the US large and medium sector.
FY20 was a very strong year for the company with revenue growth of 32% to US$129.8 million. Earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) rose by 1,506% from US$1.6 million to US$25.1 million.
In FY21 the ASX growth share is expecting EBITDAF to at least double to between US$50 million to US$54 million. The company has regularly achieved its goals for each year. Over the long-term it’s aiming for US$1 billion of revenue from the US church sector.
Pushpay continues to see an increase in demand for Pushpay’s services. I think COVID-19 is causing Pushpay’s adoption curve to accelerate and its revenue will benefit.
The ASX growth share increased its guidance a number of times during FY20. I wouldn’t expect the same to happen again, but I think could Pushpay could keep impressing.
Pushpay is trading at 32x FY22’s estimated earnings.
Share 2: A2 Milk Company Ltd (ASX: A2M)
A2 Milk has been one of the best ASX growth shares over the past five years. But I don’t think its growth is suddenly going to stop. I believe A2 Milk is one of the best opportunities within the ASX 100.
In FY20 the company is expecting revenue growth of at least 30.3%, which is impressive considering the business has been growing strongly for many years already.
It was good to read that the ASX share is expecting revenue growth in FY20 to be so strong that its earnings before interest, tax, depreciation and amortisation (EBITDA) margin to be between 31% to 32% rather than the medium-term target of 30%.
I like the 30% EBITDA margin target because it’s a good balance between profitability and investing for future growth.
It seems like COVID-19 isn’t going away any time soon, so I think A2 Milk could see elevated revenue over FY21 as well.
The ASX share is slowly but steadily growing its market share in China and the growth of its distribution footprint in the US is also very promising.
At the current A2 Milk share price it’s trading at 29x FY22’s estimated earnings.
Share 3: Kogan.com Ltd (ASX: KGN)
The online retailer has been one of the ASX shares to rebound the strongest after the initial COVID-19 crash.
But a lot of the resurgent share price performance has been justified with how much its revenue and operating profit has grown over the past few months.
In its FY20 fourth quarter it said that compared to the prior corresponding period its gross sales rose by more than 95%, its gross profit increased by more than 115% and its adjusted EBITDA grew by 149%. In June 2020 alone Kogan added 109,000 customers.
This type of growth isn’t likely to suddenly come to a stop. Australians are being urged to avoid crowded places and the shift to online shopping seems like an accelerated shift to ecommerce.
The Kogan.com share price has risen 281% over the past six months and if it keeps growing at a fast pace then its share price could keep going higher.
I think each of these ASX shares will report solid double digit revenue growth in FY21 which will hopefully equate to good profit growth as well. At the current share prices I think Pushpay and A2 Milk could be really good picks today.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Kogan.com ltd and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.